The sale of Royal Mail could cost the taxpayer more than £10bn after plans to
privatise the postal service were formally agreed by Parliament.

The legislation should become law next week and the sale could happen as early as next year.

Up to £1.7bn of public money will be injected into Royal Mail as part of the Government's privatisation plan.

Ed Davey, the postal services minister, confirmed a report in The Daily Telegraph last month that an extra bail-out is needed of Royal Mail. Adding in the cost of taking over its £8.4bn pension deficit, it means that the bill to the taxpayer of selling off Royal Mail could be more than £10bn.

Mr Davey told MPs yesterday the extra cash was vital to ensure that "the universal service" was protected.

He added: "To do this, Royal Mail needs to be on a sustainable commercial footing. The company currently has around £1.7bn of debt facilities with the Government.

"We intend to restructure the company's balance sheet in due course. In order to put Royal Mail on that sustainable commercial footing, we will need to reduce significantly that level of debt."

Mr Davey added that "we will need approval from the European Commission to provide this financial support". The Government will submit a formal application to Brussels for the money over the next few days, he added.

Vince Cable, the Business secretary, said that the Government hoped to take on the pension liabilities by March next year. This would mean that the privatisation could happen in the months after that. The post office network of around 12,000 branches will remain in state hands.

Mr Cable said: "Royal Mail and the Post Office are important and cherished parts of our society.

"Passing the legislation, reforming regulation, getting state aid approval, tackling the pension deficit – these are all vital steps that will provide momentum towards a sale of Royal Mail.

"They will also give the company the security and certainty it needs to press ahead with its essential modernisation programme."